Better Buy: Huntington Ingalls Industries, Inc. vs. General Dynamics

Both Huntington Ingalls Industries (NYSE: HII) and General Dynamics (NYSE: GD) are key suppliers to the U.S. military and its allies. With the U.S. President and the GOP talking about increasing military spending, providing the machines of war seems like a decent industry focus. But are either of these two companies worth buying? Here's a look at some of their key valuation metrics to help us answer that question.

My first move is always to take the approach of Benjamin Graham's defensive investor, as outlined in his investing classic The Intelligent Investor. A defensive investor is looking for a large company with a good earnings and dividend track record. Huntington Ingalls, which is largely focused on making ships for the U.S. armed services, traces its history back to the late 1800s. However, it has only been a public company since 2011, when it was spun off from Northrop Grumman.

That means it doesn't yet have 10 years of history as a stand-alone entity. Of course you could go back and look at the segment's performance within Northrup, but that isn't a clean picture. You would have to make a lot of estimates for things like the shared costs of accounting versus the cost Huntington would have to pay if it were on its own.

Source: Fool.com